Support grows for state production industry tax incentives

February 15, 2009
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Dear Editor,

Supporters of Michigan’s production industry tax incentive program were encouraged late last month when the New Mexico State Film Office and the State Investment Council released the results of an economic impact study conducted by Ernst & Young. The study delivers an analysis of the direct and indirect impact New Mexico’s film production tax credit program had on the state’s economy in 2007. It is available online at nmfilm.com, and it paints a positive picture of the cumulative impact New Mexico’s film production tax program has had since its adoption in 2002. While not directly related to Michigan, the New Mexico study provides insight into the potential return that Michigan’s economy can experience from an investment in the growth of the production industry here. The bottom line in New Mexico, according to Ernst & Young, is that $1.50 in state and local tax revenue is generated for every $1.00 of tax credits issued or paid out by the state.

Michigan’s production industry tax incentive program is similar to the New Mexico program, and parts of Michigan’s legislation, which was signed into law by Gov. Jennifer Granholm in April 2008, are based on the New Mexico program’s statutory framework. Both states offer a refundable tax credit against a production company’s state tax liability, both reward job training and job creation activities by participating businesses, and both programs have loan programs that can help finance production projects (although Michigan’s loan program is not funded yet). Neither program currently has a cap or a sunset.

Late in the 2008 Michigan legislative session, two bills were introduced to cap the aggregate amount of refundable tax credits available under the Michigan production industry tax incentive program. While neither bill had the requisite support to pass, their introduction was enough to create a cautionary pause by those companies that were considering bringing their production projects to Michigan in 2009. The production industry is not going to be the one thing that saves Michigan’s economy, but as the New Mexico experience illustrates, allowing the program to work can lead to real returns over a relatively short period. 

As Gov. Granholm mentioned in her State of the State address, production infrastructure projects are starting to commit to Michigan. While most of them are landing on the east side of the state, there are several local efforts that are creating jobs for West Michigan residents, as well. Production industry capital will find its way to Michigan if the environment is supportive, and it is too early to call the tax incentive program a mistake. While the MBT undergoes the reform that most political and business leaders agree is necessary, it would be a mistake to stifle the production tax incentive program before it has a real chance to positively influence the state’s economy.

Joseph L. Voss
Grand Rapids

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